How First Solar Is Remaking Itself With New Tech And Leaders

A greater focus on research and development, a new crew of top executives and a plan to tackle a market segment that has eluded it now make up a new profile for First Solar, which until recently was in a race with its competitors in China to build large factories.

The Arizona company held an analyst day earlier this week — its first since 2009 — and laid out a persuasive plan to remain one of the top solar companies in the world. First Solar’s dominance has been doubt in the past two years as an oversupply of solar panels has depressed prices and forced dozens of manufacturers worldwide to file for bankruptcy or be sold off cheaply.

The realization that building more factories, a key strategy for First Solar and its competitors for over five years, had become a really bad idea prompted the company to decide roughly a year ago to spend more money on research, said CEO Jim Hughes during the analyst day.

“Let’s be very clear: technology leadership remains a core competency and key to the company’s success,” said Hughes , who became the chief executive last year. The company shortly after hired Hughes’s competitor for the CEO position, Geroges Antoun, as its chief operating officer.

The company researchers’ mission is to greatly increase the amount of sunlight that their solar panels can convert into electricity.

During the analyst day, the company announced an efficiency record of 16.1%, which means that panel could convert 16.1% of the light it receives into electricity. That’s an improvement from the 14.4% it recorded in January 2012. Those figures represent what the best the company could produce at one time, not what it’s rolling out in mass production. But they demonstrate what the company could achieve down the road and help assure its investors that it could remain competitive. First Solar was mass producing panels with an average efficiency of nearly 13% by the end of 2012.

While the company characterized its renewed focus on technology development as a recent decision, it wasn’t as if First Solar abandoned basic research before. But incorporating newer technology into production lines takes time and money. The company was more keen on building large factories and bringing them online as quickly as possible, so it didn’t want to change its manufacturing steps too much.

The decision to focus on boosting efficiencies made sense because doing so is one of the key ways for manufacturers to reduce production costs while selling them a higher prices. They accomplish that by making solar panels that can produce more watts of energy so that the cost per watt is lower.

Another way to reduce cost is to run your production process so efficiently that you can produce far more solar panels in a given time than your competition. This had been First Solar’s winning formula for many years, all the while its solar panel efficiency lagged behind its rivals such as Suntech Power, Yingli Green Energy and Trina Solar.

It uses a non-silicon material called cadmium telluride to make ultra thin solar panels while the vast majority of its competitors use silicon. First Solar executives are bullish about the cadmium telluride technology, naturally, and its chief technology officer, Raffi Garabedian, outlined a few of the big changes that the company will introduce to its production process to boost the efficiency. One is to reduce the electrical losses by putting thin metal lines used to collect and transport electrons on the back of the cells. Another is to add a coating on the glass covering the cells to reduce glare and allow more light to enter the cells.

Garabedian, who became the head of research and development last year, contended that there is a lot more room for the cadmium telluride technology to improve its efficiency while the same can’t be said for silicon. But then, a few hours after Garabedian’s presentation, the company announced it was buying a startup called TetraSun, which has developed a process for making efficient silicon solar cells with fewer steps than are typically required, First Solar said.

First Solar wouldn’t say how much it’s paying for TetraSun. The price isn’t likely to be high, considering how difficult it has been for solar technology startups to raise money lately. TetraSun’s technology, which First Solar plans to start producing in mid-2014, will lead to more efficient panels than what First Solar produces.

First Solar would boost its competitive edge if it’s able to marry its expertise at running factory lines efficiently with TetraSun’s technology. TetraSun’s process promises to produce cells at over 21% efficiency. Some silicon solar cell makers have been able to hit 21% on their best days, but doing so consistently and in high volumes are far more difficult. (Panel efficiency is usually a bit lower than cell efficiency).

Rolling out efficient silicon solar panels would enable First Solar to tackle the residential rooftop market. Because a roof has limited space for solar panels, so you either settle for a smaller system or get the size you want by using solar panels that can produce more power. Developers who build power plants to sell power to utilities also might be willing to pay a higher price for more efficient solar panels, which allow them to construct projects with less land.

Investors were impressed with First Solar’s sales forecast and technology plans, and the company’s stock closed 45% higher on the analyst day. The company is embarking on an ambitious plan to improve its technology, though, and its future depends on executing that plan well. It’s a wait-and-see for everyone in the solar industry.

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Great story. SunPower, Suntech and First Solar have siilar histories. Suntech got founded in 2001. SunPower was rescued by a personal check from TJ Rodgers in 2001 and First Solar cracked the formula for cadtel a few months later in early 2002. All three went public around the same time–2006–and zoomed. All moved toward utility scale (with suntech screwing up) at a simlar time. SunPower went to an acquirer. Suntech went down the S-bend. And now we await what will happen to First Solar.

This is acutally a good idea for a story now that I think about it. I wish I had time to write it.

Great story. I’m from Asia and very interested in renewable energy industry. I’ve been following your posting for a while now and really enjoy all of them. I think First solar made a great decision to start increasingly focusing on the development and design of silicon-based PV cells in which the price has been significantly declined over the past two years. Although thin film PV technology such as CdTe and CIGS has shown a great potential for lower production cost, Silicon-based PV cells in the near future will still continue to dominate the residential rooftop market due to its higher conversion efficiency and capability in mature mass production.

It will be very interesting to see how its business goes with its newest plan.